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COMPETITION COMMISSION

Nod for Bayer’s Monsanto merger

The takeover of US-headquartered Monsanto by German multinational Bayer gets the green light in SA

08 May 2017 - 05:19
Hanna Ziady

Picture: FINANCIAL MAIL

The Competition Commission has conditionally approved the takeover of US-headquartered Monsanto by German multinational Bayer that will create an agricultural giant with a combined market value exceeding $150bn.

The transaction, which was first announced on May 23 2016, values Monsanto at $66bn, including debt. Bayer will buy all the shares at a 37% premium to Monsanto’s closing share price on May 9 2016.

The merged entity would be the world’s largest supplier of seeds and pesticides, controlling around a quarter of these respective markets, according to the African Centre for Biodiversity. The deal takes place amid other large mergers in the seed and agro-chemicals sectors, including between Dow and DuPont, as well as China National Chemical Corporation and Swiss-based Syngenta.

These mergers could impede research and development, increase input prices and reduce choice available to farmers, the centre said.

In SA, Bayer is active in the crop-protection business through the sale of various pesticides, while Monsanto is active in the supply of genetically modified seeds.

In terms of the commission’s approval, the merging parties will divest the Bayer cotton business, enabling an independent South African third party to supply genetically modified cotton seed in the country.

The parties will also sell Bayer’s Liberty Link technology and Liberty-branded agro-chemicals business, which develop traits and accompanying herbicides for seeds. The purchaser of these products will have to commercialise them in SA or license the products to a third party to commercialise.

"This provision is to ensure that SA will directly benefit from the divestiture of these global businesses by Bayer," the commission said.

Merger-specific retrenchments would be limited to 20 employees in SA.

Notwithstanding these retrenchments, the commission required that the existing employment levels of the combined entity be maintained for at least three years.

The merged entity had committed to offering a 25% discount to small emerging farmers relating to certain seeds for a period of three years, the commission said.

Bayer and Monsanto must seek approvals from regulators in 30 countries, including the US and EU.